Launching T-Bonds on Telos

Tuesday, Oct 13, 2020 by GoodBlock
Please vote on the Telos Amend ballot to create a unique DeFi product for Telos and dapps to unlock liquidity Telos has long been hampered in reaching a market capitalization similar to other comparable public blockchains and smart contract platforms despite its strong capabilities, groundbreaking developer tools, and growing adoption by dapps and users. Many suspect that the low liquidity of TLOS tokens and few exchanges that list it is perhaps the most significant factor in the current low valuation of Telos. Regardless of its effect on market cap, the low number and trading volume of the exchanges listing TLOS hampers usage and adoption. To address this, Telos needs to raise funds to both pay these exchange listing fees and in some cases to create trading liquidity pools. There are reserve funds available on Telos to accomplish this, but there’s a concern that releasing so many tokens on the open market would further depress the TLOS price and be counterproductive. In considering this problem in August, I realized that Telos is certainly not the only crypto project in this exact situation. I reasoned that in solving this problem for itself, Telos could also create a type of DeFi instrument that does not yet exist and could be particularly useful to many projects. Working with the Telos teams on many groundbreaking areas of blockchain, I realized that one option would be to sell locked tokens that would not become liquid until after the new exchange listings were released which, we hoped, would increase the value of TLOS much more than the subsequent loss — especially if the sale of the newly unlocked tokens were staggered and even more so if the growth in price created upward price momentum that lowered sale pressure overall. Of course, selling locked tokens is not particularly new, but it usually comes with a high premium to cover the lockup period. However, if the tokens could be locked up in a bond-like NFT, then those NFTs could gain instant liquidity by being sold on a secondary NFT marketplace. The idea of the T-Bond was born.
Figure 1. By delaying the sale of tokens until after the key milestone is achieved, the token price may avoid sell-offs and appreciate more from reaching adoption, marketing or development milestones funded by the sales.
I announced this idea and sought community feedback in the Request for Comment: RFC: Creating an Innovative New DeFi Instrument to Bring New Exchanges to Telos on August 4th, which created strongly positive results and discussion in the community. Following this, I proposed specific language that would be needed in a Telos Amend proposal on August 10th in RFC: Proposed Text for New Telos DeFi Instrument. In the meantime, I worked with Telos Core Developers (TCD) member Craig Branscom, author of the Marble NFT standard to ensure that Marble was able to support not only TLOS tokens but other Telos-based tokens as well. Craig also customized the Marble contract into a new T-Bond contract. Syed Mahdi of block producer Persian Telos graciously agreed to expedite the Marble NFT marketplace he was already building for AreaX and its upcoming galactic resource game Crypto Planets, and making adaptations needed to trade T-Bonds on it. The final piece needed will be a T-Bond sale page that the TCD or Telos Foundation will develop. The T-Bond contracts are all open source and we encourage anyone to build and release T-Bonds on Telos and to use the secondary markets or even launch their own Marble NFT marketplaces to trade them.
Figure 2. Each T-Bond NFT has a life cycle of creation where tokens are locked up, holding/trading where they may change hands, and maturity where the locked tokens become liquid again.
Now it is up to the Telos community to vote on whether T-Bonds will be approved. The Telos Amend ballot ‘tbonds’ will allow the Telos block producers to sell funds from the TLOS Recovery account in order to create T-Bonds needed to secure USDT, BTC or other funds needed to pay listing fees and build liquidity pools where necessary. In my opinion, not only will this help Telos, but it has the potential to build an entirely new form of Fintech market on Telos that other projects can use to secure funding or unlock their existing value into a liquid form without crashing their token price. The T-Bond ballot will only pass if it receives a vote of over 55% yes over no votes and a minimum threshold of several million staked TLOS. I hope there will be a healthy discussion of this. Naturally, I am very much for these proposals or I would not have put so much effort into this drive, but I intend to vote Abstain from my large accounts due to my close connection with the project. Users of Sqrl wallet version 1.2.3 will be able to vote on this ballot now. Version 1.2.4 will be released shortly which will make this somewhat easier. For Telos users who do not use Sqrl wallet, there will be tutorials on how to vote from the Telos Decide™ voting app at app.telos.net or via block explorers such as Bloks or EOSX. You can read more about T-Bonds in the RFCs above, and in the articles An Introduction to T-Bond NFTs and Using T-Bonds to Unlock Liquidity.
About the author: Douglas Horn is the Telos architect and whitepaper author and a Telos core developer. He is the founder of GoodBlock, a Telos block producer and blockchain development company currently building the dStor decentralized data storage system.